Question

Exhibit 1 The Wall Street Journal article “Jobs and the Fed” is a criticism of the supposed efforts of the Fed to be more transparent. In 2012, the Fed announced, to much fanfare, that it was going to follow the “Evans Rule”; specifically, when the unemployment rate dropped to 6.5% it would begin tightening (or at least lower the degree of easing) of open market operations in an effort to guard against a rapid increase in inflation. However, the recent spate of positive economic news and the drop of the jobless rate to 6.6% doesn’t seem to be affecting monetary policy at all. Granted, the target of 6.5% unemployment has not yet been met, but it seems only a matter of time before that point is reached and Ben Bernanke has already taken great pains to announce that the Fed Funds rate is going to remain near zero for the foreseeable future. So, in Poole’s view at least, it seems that the Fed has lost all credibility and is going to continue to keep the public in the dark about the guidelines it follows in conducting monetary policy. Exhibit 2 The Wall Street Journal article “Jobs and the Fed” is a criticism of the Federal Reserve (which implements the nation’s monetary policy). The point it makes is that the Fed, as it’s known, has in the past promised to follow certain rules in deciding what kind of policies to pursue but that it is now going back on its word. Specifically, in 2012, the Fed announced that it was going to be more transparent in its actions and was going to follow the so-called “Evans Rule” (named after the President of the Chicago Fed). That rule dictated that when the nation’s unemployment rate fell to 6.5% the Fed would pay more attention to preventing potential inflation, rather than continuing to try to reduce the unemployment rate. However, the author points out, even though the unemployment rate is expected to fall to that target level in the near future, the Fed shows no signs of changing its policy, which up to now has been targeted at increasing economic growth and reducing unemployment. Many economists believe that it is important that the Fed make clear to the public how it decides on monetary policy and to stick to its promises and are now upset that it appears the promises made in 2012 won’t be kept. The Bernard Baruch College Bert W. Wasserman Department of Economics & Finance Economics 1002-Principles of Macroeconomics-CMW Exhibits-Extra Credit Multiple Choice Quiz-Fall, 2018 Writing Samples Exhibit 3 The Wall Street Journal article “Jobs and the Fed” is a criticism of the supposed efforts of the Fed to be more transparent. In 2012, the Fed announced, to much fanfare, that it was going to follow the “Evans Rule”; specifically, when inflation rose to 2%, the upper limit of the Fed’s target range, it would begin tightening (or at least lower the degree of easing) of open market operations in an effort to guard against a further, rapid increase in inflation. However, the recent spate of positive economic news and the drop of the unemployment rate to 6.6% doesn’t seem to be affecting monetary policy at all. Granted, the target of 2% inflation has not yet been met, but it seems only a matter of time before that point is reached. Ben Bernanke has already taken great pains to announce that the Fed Funds rate is going to remain near zero for the foreseeable future and that inflation is not the Fed’s primary concern. So it seems that the Fed has lost all credibility and is going to continue to keep the public in the dark about the guidelines it follows in conducting monetary policy. Exhibit 4 The Wall Street Journal article “Jobs and the Fed” is a criticism of the Federal Reserve (which implements the nation’s monetary policy). The point it makes is that the Fed, as it’s known, has in the past promised to follow certain rules in deciding what kind of policies to pursue but that it is now going back on its word. Specifically, in 2012, the Fed announced that it was going to be more transparent in its actions and was going to follow the so-called “Evans Rule” (named after the President of the Chicago Fed). That rule dictated that whenever inflation rose above 2% the Fed would pay more attention to preventing prices from increasing, rather than continuing to try to reduce the unemployment rate. However, the author points out, even though the unemployment rate is expected to fall and inflation expected to increase to above 2% in the near future, the Fed shows no signs of changing its policy, which up to now has been targeted at increasing economic growth and reducing unemployment. Many economists believe that it is important that the Fed be aware of the dangers of inflation and always err on the side of keeping that under control, even if it is at the expense of economic growth.​(Please refer to the attached exhibits and sample article​ ). Which paragraph would be best for a target audience of people unfamiliar with​ economics? A. Exhibit 2 B. Exhibit 1 C. Exhibit 3 D. Exhibit 4

Answer 1

Answer:-

Exhibits 3 and 4 are best suited for the target audience of people familiar with economics in general and the workings of the Fed in​ particular. This is on the grounds that the sections notice about changes in the swelling rate ans joblessness rate in the nation.

Exhibits 3 and 4 are most appropriate for the intended interest group of individuals new to financial aspects by and large and the operations of the Fed in​ specific.

Exhibits 3 and 4 are the most precise on the grounds that they plainly clarify the thought process behind the strategy and how the Fed should actualize the approach now as the rates are close to the Evans Rule.

If the government buys securities in open market operations, then money supply in the economy will increase and interest rate will decrease.